Spain’s financial woes will weigh heavy on Latin America

I’m shocked and saddened by the news that the foundering Spanish economy is sinking and on the verge of going under. I’m no expert in economic indicators, but it should have been obvious to any thinking person that Spain was spending money it didn’t have. Now the demands for payment, with interest, by those who once lent money have brought the country to its knees. Before this, over a period of thirty-five years, Spain rose from poverty to affluence in an ever-ascending spiral that won international admiration. But easy credit clouded the judgment of a society showing symptoms of nouveau riche syndrome. Its leaders didn’t have the courage to admit the country was spending more than it had, and instead, they chose to look the other way.

Corkscrew is focused on Latin American issues. Literature, journalism and politics are the main concerns of this column. A corkscrew is useful only if it opens a bottle, hopefully full of something that would enlighten our spirits, but we could also set loose a cruel Genie or a rotten wine. The author will follow this principle: look for topics that open debates, new perspectives, and controversy. Cheers!

Horacio Castellanos Moya is a writer and a journalist from El Salvador. For two decades he worked as a journalist in Mexico, Guatemala, and his own country. He has published ten novels, five short story collections and two books of essays. He was granted residencies in a program supported by the Frankfurt International Book Fair (2004-2006) and at City of Asylum/Pittsburgh (2006-2008). In 2009, he was a guest researcher at the University of Tokyo. Currently he teaches at the University of Iowa.

Events in Spain have followed the classic script for plundering an economy: Speculation driven by big capital (the wrathful god known as “the market”), acting with the complicity of the local financial elite, obliterates the middle class and relegates the poor to a state of extreme misery. Latin Americans know what this looks like: Countries like Mexico, Argentina, and Brazil have been slammed repeatedly by bankruptcy. I witnessed this twice in Mexico, in 1981, and again in 1995. And while Latin American societies have still not completely recovered, they have managed to develop mechanisms of survival and resistance. Once the initial shock has passed, something similar will happen in Spain.

Nevertheless, the sinking of the Spanish economy will not only have deep repercussions throughout the euro zone, but also in Latin America. Spanish presence in the region has been felt in almost every aspect of public life. In the political realm, Spanish diplomacy played a leading role in the resolution of armed conflict and the transition to democracy in several Latin American countries. Some movements in Spain’s national political scene, especially the ruling Popular Party (PP), in conjunction with the Catholic organization Opus Dei, have also conspired to meddle in the internal politics of Latin America as a way of supporting their allies there. But without financial resources, Spain’s political presence abroad will be diminished.

In the business realm, beginning in the 1990s, Latin America became the Mecca of the large Spanish conglomerates, from Telefónica to the banks to the power consortiums Endesa (electric power) and Repsol (gas and petroleum). Eventually, vast segments of some countries’ internal markets were controlled by Spanish companies, some of which reported having earned as much as 40% of their gross annual profits from their Latin American holdings. It wouldn’t be surprising to see changes in this scenario, as have occurred already in Argentina and Bolivia, where Repsol suffered serious losses.

From an international immigration standpoint, at the height of Spain’s economic boom tens of thousands of Latin American nationals, many of them from Ecuador, Argentina, Peru, and Colombia, emigrated to the country. Currently facing high unemployment rates and the dismantling of the welfare state, many of those emigrants will have no other choice but to return to their home countries, where their arrival will have a significant socio-economic impact.

But the Spanish collapse will hit Latin America hardest in the loss of development aid. The Spanish Agency for International Development Cooperation (AECID) has maintained an important presence throughout the region, second only to the U.S. Agency for International Development (USAID) in terms of influence. AECID’s support has been critical to innumerable projects in the areas of education, the environment, sustainable agriculture, gender politics, and culture. But in the aftermath of the current economic debacle, it’s unlikely that Spain will be able to provide the same level of support for development in Latin America. The effects of this loss will be felt across social sectors, with many NGO networks to be especially hard hit.

A new era in bilateral relations between Spain and Latin America is in the wings.

About the Author

Horacio Castellanos Moya is the senior contributor to Sampsonia Way. A novelist and emeritus writer-in-residence at the City of Asylum/Pittsburgh. Born in Honduras in 1957, he grew up in El Salvador. He has lived in Guatemala, Canada, Costa Rica, Mexico (where he spent twelve years as a journalist, editor, and political analyst), Spain, and Germany. In 1988 he won the National Novel Prize from Central American University for his first novel. His work has been translated into five languages. He has published eight novels. The English translation of his novel Senselessness was published in June 2008 by New Directions. He was the second exiled writer-in-residence at City of Asylum/Pittsburgh and has resided there since 2006.

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About Sampsonia Way

Sampsonia Way is an online magazine sponsored by City of Asylum/Pittsburgh that seeks to protect and advocate for writers who may be endangered, to educate the public about threats to writers and literary expression, and to create a community in which endangered writers thrive and literary culture is a valued part of life.